Hannover Re renewed its Eurus catastrophe bond issued in July 2006. The bond with a volume of EUR 150 million ($210 million) was placed with institutional investors in Europe and North America.
Eurus II Ltd. provides cover from 30 July 2009 to 31 March 2012 against severe windstorm events in seven European countries (Belgium, Denmark, Germany, France, United Kingdom, Ireland, Netherlands). The performance of the bonds is linked to a wind speed index.
The transaction was arranged by BNP Paribas and Aon Benfield Securities. Its insurance risk components are clearly and simply structured. Eurus II also benefits from an innovative repurchase agreement, under which BNP Paribas guarantees the minimum return on the portfolio and offsets any fluctuations in value on a daily basis. The investors' paid-in capital is put into corporate and government bonds.
The Eurus II transaction has received a preliminary rating of "BB" from the rating agency Standard & Poor's. AIR Worldwide Corporation handled the modelling of the underlying risks. Hannover said that the deal oversubscribed and as a result the original issuance of EUR 75 million was doubled to EUR150 million.
"This transaction strengthens our risk management and protects our capital against events with a return probability of between 50 and 80 years. We thus continue to be able to provide windstorm protection for our European clients,” said Chief Executive Officer Ulrich Wallin.